“Given all the uncertainty that is out there, the market
will remain in a sort of risk-off mode, and that’s positive for
bunds,” said Elwin de Groot, a senior market economist at
Rabobank Nederland in Utrecht. “All these protests are weighing
on sentiment.”

Germany’s 10-year yield was little changed at 1.46 percent
at 11:38 a.m. London time after declining to 1.45 percent, the
lowest level since Sept. 5. The 1.5 percent bond due in
September 2022 traded at 100.335. The yield has dropped 12 basis
points this quarter.

Protesters in Madrid called on Rajoy to reverse austerity
measures as his nine-month-old government prepared its fifth
package of budget cuts. The premier is struggling to persuade
European leaders, voters and investors that he can tackle the
crisis, as Spain’s bond yields surge amid rising investor
expectations that Rajoy will delay asking for external aid.

“We’re in a waiting mode here where we see some volatility
but the overall trend is sideways,” said Allan von Mehren,
chief analyst at Danske Bank A/S in Copenhagen. “So far Spain
has been dedicated to reaching its budget targets and it’s very
important that they stick to the commitment.”

Italy sold 2.93 billion euros of bonds due in November 2022
at an average yield of 5.24 percent, the central bank said.
Investors bid for 1.33 times the amount allotted, down from a
so-called bid-to-cover ratio of 1.42 times at a similar auction
on Aug. 30. The nation also sold 2.72 billion euros of debt due
in 2017 and 1 billion euros of floating-rate notes.

Italian Bonds

Italy’s 10-year bond yield was little changed at 5.21
percent. The extra yield that investors demand to hold Italian
10-year debt instead of similar-maturity German securities
climbed to as much as 380 basis points, the most since Sept. 6.

Italian two-year notes fell for a sixth day, the longest
run of declines since May 18. The yield climbed four basis
points to 2.50 percent

German two-year notes were little changed after a report
showed unemployment in Europe’s largest economy climbed for a
sixth month in September. The number of Germans without a job
increased a seasonally adjusted 9,000 to 2.91 million, the
Federal Labor Agency in Nuremberg said.

Germany’s two-year note yielded 0.04 percent.

Volatility on Greek bonds was the highest in euro-area
markets, followed by Ireland, according to measures of 10-year
or equivalent-maturity debt, the spread between two- and 10-year
securities and credit-default swaps.

German bunds returned 3.2 percent this year through
yesterday, according to indexes compiled by Bloomberg and the
European Federation of Financial Analysts Societies. Spanish
securities were little changed, while Italy’s earned 14 percent.